JUNE 26: Fonterra, the world's biggest dairy exporter, said on Wednesday its Australian milk production fell 13.7% in April from a year earlier, with drought conditions pushing up costs.
Hot, dry weather across Australia and New Zealand has crimped Fonterra's output so far this year, with increased fodder prices and scant irrigation weighing on the agriculture sector in general.
Fonterra said its May milk output in New Zealand, which accounts for the bulk of its production, fell about 0.1% from a year ago. The flat result was much improved from a 10% fall in April due to better weather conditions, including some rainfall.
The dairy producer said total milk collection in New Zealand for the season ended May 31 was up 1% on last year, which was seen as a weak season, and it forecast a flat result in 2019/20.
Fonterra in May cut its annual earnings forecast and said it would close a more than 100-year-old facility in Australia.
Reduced supplemental feeding, increased cow cull rates and a high number of farmers leaving the industry has hurt its output in Australia, where production also fell 10% in March.
While production remains under pressure, demand for Fonterra's goods remains strong.
Fonterra said its dairy exports from New Zealand rose by 13.6%, or 37,100 metric tonnes, in April from a year ago, primarily driven by whole milk powder and liquid milk products. The rise followed a 27% jump in March, and the company pointed to strong demand in China and the rest of Asia.
Its Australian dairy exports increased by 5.6% in April, compared to the same period last year.
China serves as one of the largest markets for the company, given the popularity of its infant formula and milk powder products in the country.
However, the ongoing Sino-U.S. trade war has raised concerns about slowing demand. Global dairy prices fell for a third auction in a row last week as an uptick in production outpaced demand.
The co-operative's shares traded flat after opening stronger in a largely flat broader market.
